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San Jose Gets Creative to Help Homeowners Pay for Solar

By Amy Westervelt, InsideClimate News

Jun 24, 2009

By this time next year, thousands of San Jose rooftops could be covered with solar panels — with the homeowners paying little upfront cash thanks to some creative solar financing.

City officials announced at a City Council meeting yesterday that they were drawing up plans for San Jose to become one of the first major cities to take advantage of the new CaliforniaFIRST statewide assessment district.

The district will sell energy bonds to fund loans to residential and commercial property owners, not only for solar installations but also for energy efficiency improvements such as new insulation or replacing water-hungry fixtures with low-flow models (because water equals energy, but you know that already).

It's an example of one of today's more successful solar financing strategies — property tax financing, which allows property owners to pay for their solar panels over 20 years via a line-item addition on their property tax bills. If the owner sells the house, the solar tax assessment shifts to the new owner, eliminating two stumbling blocks at once: the upfront cost of a $10,000-plus solar installation and concerns about the investment paying off.

We spoke with Nanci Klein, manager of corporate outreach for the City of San Jose's economic development office, who was excited about the city's proposed involvement with CaliforniaFIRST.

"We're hoping for a few thousand people to participate in the first round, and it will keep going as long as people are interested," Klein says.

The statewide assessment district was developed by California Statewide Communities Development Authority (CSCDA) and allows cities and counties that express official interest in the program to access statewide bond financing. CSCDA sells bonds on behalf of the CaliforniaFIRST participants, thus lifting the financial responsibility off of individual cities and allowing them to tap into the economies of scale provided by a statewide taxable bond sale.

This type of financing is beginning to take off across California. Berkeley became the first to attempt it earlier this year, and its Berkeley First pilot program, which financed 35 solar roof installations, has become the blueprint for followers. The application process for that program is now closed, however, and the city is evaluating whether to continue it.

Though largely credited with starting the property tax financing trend, Berkeley did so before AB 811 passed and thus had to take responsibility for funding the program itself. Now that there are other options available, the city may well opt to join either CaliforniaFIRST or a regional assessment district that the Association of Bay Area Governments (ABAG) is putting together.

In the meantime, larger cities are talking about following in Berkeley's footsteps.

San Diego is set to launch a similar program next month, and San Jose hopes to launch its program by the end of the year. San Francisco also plans launch a version this year; it currently offers GoSolar incentives of $4,000 to residential property owners and $10,000 to commercial property owners for solar installations.

Why California?

While some municipalities outside California have tried municipal solar financing — Boulder, Colo., offered a first round of financing in April, for one — the majority of the progress has been in the Golden State, thanks to its passage last year of AB 811. The bill allowed for the creation of loan assessment districts that are authorized to sell bonds in order to secure loans for renewable energy installations and energy efficiency upgrades.

With both statewide assessment districts like CaliforniaFIRST and more localized assessment districts that operate either in single cities or in larger counties or regions (the Association of Bay Area Governments plans to have a district comprised of the nine Bay Area counties it represents by later this year), California residents will eventually be able to take their pick of programs.

If there are differences between them, residents are free to go with whichever loan suits them best.

"You'll see a whole cottage industry I think for solar financing and energy efficiency financing, and it will bring with it jobs," Klein says. "We're focusing training dollars that have come to us through regular and stimulus money towards getting people ready for solar and energy efficiency-related jobs."

Though California was the first state to authorize such districts, Louisiana is following closely with the proposal of Senate Bill 224. The state's Senate unanimously passed the bill on June 10, and it is awaiting a vote from the House. If it passes, it will go into effect by August.